Friday, September 10, 2010

Where Is Your Money Going?

You've tracked your spending for a week. Were you surprised by where your money was going? Random spending isn't the only place where we lose money. This week, we'll look at other places you may be bleeding money including account mistakes, overdraft fees, finance charges and impulse buying.

You kept all your receipts or wrote down what you spent, on what and when. You created a spreadsheet to help you add it up.

How do you feel?

You may have felt like it was a pointless exercise (no it wasn't, as I'll explain) or that you didn't learn anything new about your spending patterns or you were blown away by where your money goes in just a week.

Why are you doing this? Chances are, you've never done it before. You may be struggling with debt, or struggling to save for the things that you want or simply struggling to pay for anything at all. Maybe you aren't struggling with any of those things, but you're often hit with expensive surprises at the end of the month -- Not quite enough left in checking to cover the rent next week? Suddenly missing $100 that you don't remember spending, but it sure isn't in your account? Getting an e-mail about your account being overdrawn?

You track your spending to look for the obvious holes. Once you see the obvious holes, you can get better at spotting the less obvious ones, which we'll talk about in this post. The longer you track your spending, the more accurate a picture you have of your overall finances. The more accurate your picture, the better planning you can do for your finances. The better your financial plan, the LESS you'll have to do the tedious work of tracking every penny. If your plan is tight, there won't be any surprises! That's why this is not a pointless exercise.

But you also must walk before you can run.

Here are five places to look to save money that you may not normally look:

1. Bank and credit card statements. Banks are not infallible. Banks make mistakes with YOUR money. Check your statements and make sure you weren't charged any erroneous fees or that someone else hasn't gotten a hold of your information and is shopping on your dime. If you have a questions or suspicions, CALL YOUR BANK. You might be the one mistaken, but it's better to get it straight than to assume everything is fine. The same goes for any other bills including your cell phone, utilities, etc.

2. Monthly fees vs. annual costs. Why do you think car dealers ask you "How much are you looking to pay a month?" when you are looking to buy or lease?
The CORRECT question is "How much do you want to pay for this car and how long do you want to pay on it?"
Why do they ask the first question and not the second one?
Because by getting you to think only about the monthly fee for that car, they can get you to pay way more for it than it may be worth.
It's the same with any other monthly fee -- a low fee may seem like a bargain, but multiply by 12 and see how much money you may be losing on something in a year.

Look at your bills and bank statements and see what things you're charged for each month (besides your rent or mortgage). Multiply that monthly charge by 12 -- that's what it costs you each year. Do you really want to spend that much on whatever it is each year? Could you possibly spend less on that same service?

3. Your cell phone. Of course you need it, but could you potentially spend less on it each month? Are you using all those minutes? If not, can you roll them over? If not, can you get fewer minutes for a lower price? Are you paying per text message and frequently go over the limit?
Many cellular providers' websites allow you to "analyze" your bill. You punch in your information and then it lets you know if you're actually using everything you're paying for. If you aren't, you may want to cut back on your services or options and save some cash.

4. Your friends and family. Are you the one always covering somebody, helping a sistah out, bailing out a brother, or footing someone else's bills? Maybe it's just $20 here and there, but how often do here and there call you asking for money?

5. Your vices. Cigarettes. Alcohol. Ice cream, and lots of it. These are all things that may be hurting more than your wallet! Have you lost $100 and gained 10 pounds this month and don't quite know how? Look here. Your indulgence in these things may also be costing you indirectly -- does your company benefits plan charge additional fees if you're a smoker, drinker, or significantly overweight?

Right now, I'm not asking you to start or stop doing anything. I'm just asking you to take notice of these things that you probably never spend time thinking about.

Once you recognize your patterns, you can do something about them -- channeling that same brain power to help you instead of hurt you.

Spend this week checking on where you money goes and seeing if there are places where you can stop the bleeding. Once you identify those areas, close them up!


Debt Hater
is a personal finance blogger who paid off nearly $16,000 in credit card debt (not including a car loan!) in four years, just like she planned. You can visit her blog at

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